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Just How Many Student Loan Borrowers are Delinquent?

New Report Examines the Repayment Experiences of More than 1.8 Million Student Borrowers

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Washington, D.C., March 15, 2011—As the number of student loan borrowers has increased and their cumulative indebtedness has grown, so too has concern about whether the resulting debt levels are manageable and about what the long-term impact of student loan debt will be on other life choices, credit scores, and future borrowing. Absent better data, policymakers and others who focus on higher education issues have relied primarily on institutional default rates and anecdotal accounts. Now, for the first time, a study conducted by the Institute for Higher Education Policy (IHEP), using an unprecedented wealth of data provided by five of the nation’s largest student loan guaranty agencies, examines in detail the complete repayment experiences of nearly two-thirds of all federal student loan borrowers.

The new report, Delinquency: The Untold Story of Student Loan Borrowing, examines more than 8.7 million student borrowers with nearly 27.5 million loans who entered repayment between October 1, 2004 and September 30, 2009. With a primary focus on the nearly 1.8 million student loan borrowers who entered repayment in 2005, the study provides data on the repayment behavior of borrowers and quantifies how many are having difficulty repaying their federal education loans. The study also highlights the scope of student loan borrowers who become delinquent on their loans, but who do not default, and suggests that to fully capture borrowers’ struggle with repayment each month, data must look beyond just default.

Key Findings About Delinquent Student Loan Borrowers Who Do Not Default

For every student loan borrower who defaults, at least two more borrowers become delinquent without default.

Two out of five student loan borrowers are delinquent at some point in the first five years after entering repayment. This equates to 41 percent of the borrowers (712,000 borrowers and $11.6 billion in loan activity) who faced the negative consequences of delinquency or default.

Certain student loan borrowers—those considered more at risk than their peers—may require additional attention and information to prevent delinquency and default. For example, the rates of delinquency and default were generally much higher for borrowers who had not graduated than for those who had.

More than a third of borrowers (37 percent) were able to repay their loans in a timely manner, while 23 percent were able to postpone repayment by using deferment or forbearance to avoid delinquency.

Findings focus on the repayment experiences of borrowers, including whether they repaid on time, postponed repayment, or became delinquent; borrowers’ characteristics; average loan amounts; intervention tools and options; and background information on the consequences of delinquency and default to offer a better understanding of borrowers' struggle with repayment and the impact on their financial futures. Borrower information was made available by American Student Assistance, ECMC/CA, Great Lakes Higher Education Guaranty Corporation, Texas Guaranteed Student Loan Corporation, and USA Funds.

"This study paints a realistic picture of the size, significance, and experiences of delinquent student loan borrowers who manage to avoid default—rather than focusing only on borrowers' cohort default rates," said IHEP President Michelle Asha Cooper, Ph.D. "We hope these findings will inform policies that can help borrowers avoid facing the negative consequences of delinquency and default as well as institute practices that will include proactive and timely communications about repayment options—including deferment and forbearance—to protect the future financial well-being of those who must borrow to pay a portion of their college costs."

Delinquency: The Untold Story of Student Loan Borrowing intends to help reframe the debate about student loan debt to include the causes and consequences of delinquency—before default—to improve borrowers’ experiences, enhance the student loan program, save taxpayers’ money, and perhaps contribute more broadly to higher education as a whole. In addition, the study provides the full scope of the “delinquency before default” problem to better inform policy circles, where the focus is primarily on default.

About the Institute for Higher Education Policy

The Institute for Higher Education Policy (IHEP) is an independent, nonprofit organization that is dedicated to increasing access and success in postsecondary education around the world. Established in 1993, the Washington, D.C.-based organization uses unique research and innovative programs to inform key decision makers who shape public policy and support economic and social development. IHEP’s web site, www.ihep.org, features an expansive collection of higher education information available free of charge and provides access to some of the most respected professionals in the fields of public policy and research.